The Process of Finding Investors

[Jake]

You have no option to learn backend programming to build the site yourself, because you must get the product build within the next 6 months. You have no option to find a cofounder, because you wouldn't meet your monetary goals with a founder's dilution. How would you go about solving this problem?

Think bigger or lower your expectations. Either will do.

 

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[MJ DeMarco]

You have no option to find a cofounder, because you wouldn't meet your monetary goals with a founder's dilution.

Seriously?

100% of nothing is nothing.

1% of something is something.

And BTW, a 1% interest in a startup with a $1B market cap is still $10M dollars. 10% is $100M.

IMO, you're more interested in money rather than creating value -- otherwise, such would not be an issue as you would be driven by the problem you seek to solve.

"Ill do whatever it takes" is not the same as "Ill do whatever it takes, as long as I get paid handsomely to do it."

 

[GoneAt24]

Seriously?

100% of nothing is nothing.

1% of something is something.

And BTW, a 1% interest in a startup with a $1B market cap is still $10M dollars. 10% is $100M.

Is that what you would put on the essay question?

100% of nothing is nothing. I'm not sure that would be relevant if I received seed money to build a product. Then I would own a higher percent of something.

It seems as though no one here thinks it's even possible to get an investor at the seed stage. It happens. That's why the seed stage even exists. I thought here might be the place to soak in some of that information.

Given the question. Yes, seriously. What would be your answer?

 

[MJ DeMarco]

It seems as though no one here thinks it's even possible to get an investor at the seed stage.

Of course it is -- but you have to show the ability to execute and have a track record of such.

I've sold two companies/entities in my past, one to startup, and another to a private equity company -- how difficult do you think it will be for me to find a "seed" investment? Not too hard -- I have a track record and a history of execution.

What do you have?

A business plan. An idea.

Great.

Step in line behind the millions of other aspiring entrepreneurs.

You've shown neither a track record nor an ability to execute, or at least, not displayed it here. That makes you no different than anyone else with some random idea and a fancy college-level report with some charts and graphs.

Frankly, you won't stand out to an investor unless you demonstrate either of the above. Hence, my repeated preaching of getting a prototype out in the wild so you demonstrate execution and perhaps maybe, be attractive to an investor like myself, who actually is in the position to write you a check for $347,000.

 

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[Vigilante]

A simple exercise is to watch Shark Tank, which is a small microcosm of the real world. Their first response to someone in the idea phase, with no real revenue... is usually laughter.

Not to say it doesn't happen, but the stars have to align perfectly (usually with a rich uncle whom has always liked you) to get start up capital for an idea.

Ideas are like assholes. Everyone has one.

Money is tighter today than at any time in my business life. The scrutiny is harder, the information is better, and the investors are wiser.

A business plan doesn't mean shit to most people. Real business does.

$347,000 with zero revenue tells me you want :
1. a salary
2. a nice office
3. employees

Until you have something quantifiable to demonstrate likely return of principal plus more to an investor, nobody should give you money to take
1. a salary
2. a nice office
3. employees

Go earn something. Present something to prospective owners of your company (that's what you are looking for... a salary from your owner) a reason to hire you. If you borrow $347,000 from someone, you're going to be working for their company... even if your name happens to be on the door.

 

[Jake]

My buddy has gone through several rounds of funding. What did the investors require? A full-time programmer.

what is your plan? Are you going to approach investors and tell them you're going to search for a developer on Elance? Have you contacted developers and asked them what it would cost? Do they have the time to work on it if you receive funding? Will they stay on the project? Will they be as driven as you are if they are not receiving an equity stake?

Put yourself in the shoes of an investor. They see no product. You are not a developer. You don't own anything and cannot build the product. WHY would they give you their hard earned money?

 

[AllenCrawley]

The bulk of it is for engineer salaries. I don't know back end coding. Of course finding a co-founder with that skill set would help, but the equity tradeoff would be - probably - close if not equal to 50%. Raising seed funding, the tradeoff wouldn't be as steep.

Believe me, I've explored the option of building a minimum viable product. In my specific circumstance it wouldn't be profitable.

I know this isn't addressing your specific request but I'm curious why you believe an MVP is not an option for you. Have you read "The Lean Startup"?

Have you researched start-up incubators and tech accelerators? There is one close to me that also provides seed money for great ideas and only take 20% equity and they have a staff on developers, coders, designers and marketers at your disposal.

Have you read "Pitch Anything" by Oren Klaff.

Investor money is everywhere, even stupid investor money (I'm not saying someone investing in your idea would be stupid). If you really wanted this you wouldn't be spending all this time on forums hoping for someone that you don't know to help someone they don't know.

Get out there and make it happ'n, capt'n.

 

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[GoneAt24]

Of course it is -- but you have to show the ability to execute and have a track record of such.

I've sold two companies/entities in my past, one to startup, and another to a private equity company -- how difficult do you think it will be for me to find a "seed" investment? Not too hard -- I have a track record and a history of execution.

What do you have?

A business plan. An idea.

Great.

Step in line behind the millions of other aspiring entrepreneurs.

You've shown neither a track record nor an ability to execute, or at least, not displayed it here. That makes you no different than anyone else with some random idea and a fancy college-level report with some charts and graphs.

Frankly, you won't stand out to an investor unless you demonstrate either of the above. Hence, my repeated preaching of getting a prototype out in the wild so you demonstrate execution and perhaps maybe, be attractive to an investor like myself, who actually is in the position to write you a check for $347,000.

Thank you! For some reason, even though this didn't necessarily answer the hypothetical, it made more sense than the previous posts.

Even still, I maintain that it must be remotely possible to convince an investor - given a warm introduction from an investing mentor that I've spent time getting to know - that I have the ability to execute.

 

[GoneAt24]

Put yourself in the shoes of an investor. They see no product. You are not a developer. You don't own anything and cannot build the product. WHY would they give you their hard earned money?

I would imagine that they would "give" me their hard earned money because they saw the opportunity for investment. The majority consensus
seems to be, "Build the product." or "Find a co-founder."

There are other ways to show the ability to execute, though. What about connecting with a successful entrepreneur as an advisor who'd be willing to vouch? There must be more ways.

 

[Vigilante]

I knew a guy who spent more time raising funds for his business than he did running his business.

Then... he got to spend a lot of time with the SEC explaining why he spent more time raising funds for his business vs. running a business.

You want a sugar daddy. Someone might invest in you, as long as the experienced entrepreneur who vouches for you does so by signing a personal guarantee. This isn't Monopoly money you are asking for. Have your grandma mortgage her house and give you the money if it's such as sure thing. If it's not a sure thing, why would anyone want to buy your idea?

I'm out. Good luck to you. Hope you find the pot at the end of the rainbow you are looking for! I believe in good old fashioned hard work.

 

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[GoneAt24]

If you really wanted this you wouldn't be spending all this time on forums hoping for someone that you don't know to help someone they don't know.

If by help you mean a compass, I thought that that was the entire point of the forum.

Get out there and make it happ'n, capt'n.

I am simultaneously experimenting with other ways of connecting; trying to decrease the degrees of separation between the willing investor and me.

 

[GoneAt24]

I believe in good old fashioned hard work.

As do I. Raising funds is one such example. But thank you for your input.

 

[H. Palmer]

Gone,

I'm curious. Are you actually trying to raise money or are you collecting input for writing an essay?

 

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[Nick]

347,000 money for seed money is too much based on an idea (business plan is not taken into account too much by real businessman, as everyone knows you can make a business plan say whatever you want to say). Try to apply to an incubator. The ones that invest 15,000- 20,000$ in your idea in exchange for 6-8% of your business, but more importantly, they put you in touch with a network of investors, so after you spend 15-20k and reach a prototype, you have a change to present your demo to more investors and have a realistic shot at getting 347,000$.

The most famous incubator for tech projects is Y Combinator. Look it up. Tech stars is the second one.

PS: do not start telling them you need office, salary, employers, etc.. that's for people who have proved themselves. If you are starting with no track record, you need to eat ramen noodles and work full time to build your product. Eventually you can use the 15-20 k to hire a back end programmer for 3 months, that should be enough to get you to a working demo that you can present to investors for further investing.

 

[GoneAt24]

Gone,

I'm curious. Are you actually trying to raise money or are you collecting input for writing an essay?

I'm actually trying to raise money. I just thought that if I redirected the question in the form of an essay question, that those who gave answers would seize to deviate from the original given circumstances of the question.

I know what conditions are prime for raising money. Have a product. Have a team. Have traction. These things are obvious, and I knew all of that information before creating this thread. My purpose in creating the thread was to get input on, given subprime conditions, how one would go about finding proper funding.

 

[GoneAt24]

347,000 money for seed money is too much based on an idea (business plan is not taken into account too much by real businessman, as everyone knows you can make a business plan say whatever you want to say). Try to apply to an incubator. The ones that invest 15,000- 20,000$ in your idea in exchange for 6-8% of your business, but more importantly, they put you in touch with a network of investors, so after you spend 15-20k and reach a prototype, you have a change to present your demo to more investors and have a realistic shot at getting 347,000$.

The most famous incubator for tech projects is Y Combinator. Look it up. Tech stars is the second one.

PS: do not start telling them you need office, salary, employers, etc.. that's for people who have proved themselves. If you are starting with no track record, you need to eat ramen noodles and work full time to build your product. Eventually you can use the 15-20 k to hire a back end programmer for 3 months, that should be enough to get you to a working demo that you can present to investors for further investing.

Thank you very much for your input. Actually very helpful.

 

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[DeletedUser2]

@ gone,

you only have an IDEA. no track record of execution.

as an investor, most would evaluate your business, and give you the money and you get a 5% stake at this juncture.

you are completely ignorant of how investors see things. and yet you are not listening to anyone here.

1. idea only, no programing, you have to get people? low value high risk. (you get 5% of biz or just NO)
2. just you? no TEAM that you have built ahead of time (believe it or not, this is a form of a product,) surrounding yourself with the people who buy into your dream, and are ready to set aside part of their lives for it? (cool maybe you get to keep 20-35%)
3. Co founder who brings extreme value to the deal (maybe you get to keep 30%)
4. a viable product mockup, and Minimum viable product? (maybe get to keep 35-40%)
5. Users of product, but no revenue, (maybe keep 35-45%)
6. Users Raving about your product, and some sales (keep 45-60%)
7. Profitable, users, growth, sales, raving users! ( keep 75% )

this is just to give you an eye opening example of how investors would look at you.

now, Re assess where you are, and pull your head out, and stop insulting people here. this is my last post on this thread also.

Z

 

[GoneAt24]

@ gone,

you only have an IDEA. no track record of execution.

as an investor, most would evaluate your business, and give you the money and you get a 5% stake at this juncture.

you are completely ignorant of how investors see things. and yet you are not listening to anyone here.

1. idea only, no programing, you have to get people? low value high risk. (you get 5% of biz or just NO)
2. just you? no TEAM that you have built ahead of time (believe it or not, this is a form of a product,) surrounding yourself with the people who buy into your dream, and are ready to set aside part of their lives for it? (cool maybe you get to keep 20-35%)
3. Co founder who brings extreme value to the deal (maybe you get to keep 30%)
4. a viable product mockup, and Minimum viable product? (maybe get to keep 35-40%)
5. Users of product, but no revenue, (maybe keep 35-45%)
6. Users Raving about your product, and some sales (keep 45-60%)
7. Profitable, users, growth, sales, raving users! ( keep 75% )

this is just to give you an eye opening example of how investors would look at you.

now, Re assess where you are, and pull your head out, and stop insulting people here. this is my last post on this thread also.

Z

It was never my intention to be insulting as much as to poke until I got some information that I didn't already know. This post has been one of if not the most helpful of this thread. Thank you.

 

[Kak]

@Gone

Look at my avatar very closely. A very important lesson.

 

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[brighterside]

It seems as though no one here thinks it's even possible to get an investor at the seed stage. It happens. That's why the seed stage even exists. I thought here might be the place to soak in some of that information.

Hi there again.

After reading some of the advise that were given here (to you) - IMO you don't need an investor. Investors won't create you the product that you dreamed about and won't bring you happiness ever after. Besides all you have is an idea and not a lot of investors will throw money away at an idea. Ideas are a dime a dozen. Everyone has them and they aren't worth anything.

What you need is a business partner.It can be a coach or someone that has been through the ropes of doing a startup. Experience to an investor in invaluable. If they know you have a team that can deliver to make your idea happen then investors are more apt to pay in to your idea.

Going alone does not help. Not wanting to seek a partner doesn't help. If you want to really succeed you'll need to find someone with experience to guide you. It seems that is what you need not an investor.

 

[GoneAt24]

Going alone does not help. Not wanting to seek a partner doesn't help. If you want to really succeed you'll need to find someone with experience to guide you. It seems that is what you need not an investor.

I think that you're absolutely right. After the back and forth on this thread I think that my attention would be best directed toward building a team. That's where I'll focus next.

 

[MJ DeMarco]

Sorry for the thread hijack but...

Does anyone now how I can get a construction loan for house I want to build? I have no credit, no money, and no assets -- I just know I want to build it on Laguna Beach overlooking the Pacific Ocean. (But I do have blueprints sketched out on a few sheets of paper.) Does anyone know any good carpenters? Electricians? Plumbers?

 

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[GoneAt24]

Sorry for the thread hijack but...

Does anyone now how I can get a construction loan for house I want to build? I have no credit, no money, and no assets -- I just know I want to build it on Laguna Beach overlooking the Pacific Ocean. (But I do have blueprints sketched out on a few sheets of paper.) Does anyone know any good carpenters? Electricians? Plumbers?

Good to see the boss of the place has a sense of humor. Facetious, but funny nonetheless.

 

[johnp]

You said that your idea is social media. Never had a chance to look at the article that you posted.

are you talking building a custom social network from scratch? Or something to be integrated with other social networks such as FB? Like an FB app?

 

[GoneAt24]

You said that your idea is social media. Never had a chance to look at the article that you posted.

are you talking building a custom social network from scratch? Or something to be integrated with other social networks such as FB? Like an FB app?

Custom from scratch. Not trying to take down the giants, but I think - given the problem being solved, the timing, and my connections with the demographic - I have a real opportunity to capture significant market share.

 

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[MJ DeMarco]

I think that my attention would be best directed toward building a team.

A great place to start. A great team w/execution history will start putting height between you and the crowd.

Good to see the boss of the place has a since of humor. Facetious, but funny nonetheless.

And you're a good sport -- that will work in your favor during your search.

 

[johnp]

Custom from scratch. Not trying to take down the giants, but I think - given the problem being solved, the timing, and my connections with the demographic - I have a real opportunity to capture significant market share.

I built a custom from scratch for a fraction of what you are asking for investment wise. The diff. seems to be that I'm not trying to do it all at once. I have some very advanced features, but at the same time there are a lot of key features missing. One thing that I have learned is that A lot of people just want to be part of something and they will sign up for a social network based on that idea (being part of something) alone.

So here's the thing. You don't need to build a social network for all of that money. Start small with your unique selling proposition/your Why - In this case it appears to be something security wise. Target the subset of users who give a shit about their security on social networks and start making real traction. Build in some early revenue streams so you can afford to develop your idea. Focus on retention, then build out features to increase usage.

You don't need all of that money to get started. You may need it down the road if you really start making good traction.

 

[GoneAt24]

And you're a good sport -- that will work in your favor during your search.

Thank you, tough skin from collegiate debating.

If anyone reading this thread has skills in backend programming (PHP, Python, Ruby, etc.) feel free to PM me as I continue my search for a co-founder.

I won't pretend that the idea is the most innovative thing since the Apple II, but it is creative enough to be successful. The thread has been invaluable.

 

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[Eskil]

This thread has been great to follow - both for the insight from veteran members, but also to see that the OP is beginning to take the advice to heart. Just another reason why this forum is so awesome.

@GoneAt24: Once you have validated your idea and reached a point where it's time to look for actual investors, some online resources for this are:

Investors, Angel Investors & Venture Capital | Startups.co
Angel Investor - California and Pacific Investment Network - California and Pacific Coast Angel investors
Central Investment Network - Connecting American Entrepreneurs with Angel Investors
Venture Capital Investors - Texas Investment Network - TX Angel
Midwest Investment Network - Angel Investors, Entrepreneurs & Business Partners
Southeast Investment Network - Find funding and find investments
Angel Investment Network (Mid-Atlantic) - US Business Entrepreneurs & Angel Investors
Angels Investment Network

Also, check out the blogs for the Canadian TV-show Dragon's Den. It's like Shark Tank, and even has some of the same investors on there. Lots of good tips in those blogs that you can pick up from these people:
Blog Archive - Dragons' Den - CBC Television

 

[GoneAt24]

Once you have validated your idea and reached a point where it's time to look for actual investors, some online resources for this are:

Amazing links. Thank you for the support.